NEW YORK, Jul 30, 2013 (BUSINESS WIRE) --
Coach, Inc.
COH, -0.32%
(sehk:6388), a leading New York design house of
modern luxury accessories, today reported net sales of $1.22 billion for
its fourth fiscal quarter ended June 29, 2013, compared with $1.16
billion reported in the same period of the prior year, an increase of
6%. On a constant currency basis sales rose 9% for the quarter. Net
income for the quarter totaled $254 million, with earnings per diluted
share of $0.89, excluding unusual items. This compared to net
income of $251 million and earnings per diluted share of $0.86, in the
prior year's fourth quarter. Reported net income totaled $221 million with
earnings per diluted share of $0.78.

For the fiscal year, net sales rose 7% to $5.08 billion from $4.76
billion the prior fiscal year while net income excluding unusual items
increased 3% to $1.07 billion from $1.04 billion. On a constant currency
basis sales rose 8% for the year. In addition, diluted earnings per
share on a non-GAAP basis rose 6% to $3.73 from $3.53. Reported net
income for the year totaled $1.03 billion and earnings per diluted share
were $3.61.

Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc. said,
"During the fourth quarter we approached double-digit growth in constant
currency and continued to gain overall traction on our key strategies
supporting our brand transformation. We generated strong international
results, leveraged the Men's opportunity globally, strengthened our
digital capabilities and drove excellent initial results in the
re-launch of footwear. While we maintained our outstanding profitability
levels, we were not satisfied with our performance in the Women's
handbag and accessories category in North America."

"Fiscal 2013 was also a year of many milestones, including the
acquisition of our retail businesses in Malaysia and Korea and the
transition of Coach Europe to a directly operated business just after
the close of the year. During fiscal 2013, our Men's business grew
nearly 50% to over $600 million at retail. In China, our fastest growing
market, sales grew 40% and totaled about $430 million. We also continued
to make significant strides in strengthening our senior creative team."

For the quarter, on a non-GAAP basis, operating income totaled $371
million, essentially even with the year-ago period, while operating
margin was 30.3% versus 32.1%. During the quarter, gross profit rose 6%
to $892 million from $838 million reported a year ago, while gross
margin was 73.0% versus 72.6%. SG&A expenses, as a percentage of net
sales, totaled 42.6%, compared to the 40.5% reported in the year-ago
quarter, reflecting the acquisition of retail businesses in Asia earlier
in the year.

For the quarter, reported operating income totaled $318 million, while
operating margin was 26.0%. Gross profit was $887 million, while gross
margin was 72.6%. SG&A expenses, as a percentage of net sales, totaled
46.6%. On a reported basis, operating income for the fourth quarter of
FY12 was $352 million with a 30.4% margin and the SG&A expense ratio was
42.1%.

For the full year FY13, on a non-GAAP basis, operating income totaled
$1.58 billion, 2% above the $1.55 billion reported in the year ago
period, while operating margin was 31.1% versus 32.6%. During the year,
gross profit rose 7% to $3.70 billion from $3.47 billion a year ago.
Gross margin was 73.0% versus 72.8% a year ago. SG&A expenses, as a
percentage of net sales, totaled 41.9%, compared to the 40.2% reported
in fiscal 2012.

For the full year FY13, reported operating income totaled $1.52 billion,
while operating margin was 30.0%. Gross profit was $3.70 billion, while
gross margin was 72.9%. SG&A expenses, as a percentage of net sales,
totaled 42.8%. On a reported basis, operating income for the fiscal year
2012 was $1.51 billion with a 31.7% margin and the SG&A expense ratio
was 41.0%.

During the fourth quarter of FY13, the company recorded charges of $53
million for unusual items. These consisted primarily of corporate
restructuring severance-related expenses, impairment charges related to
retail stores as well as a write down of a small amount of inventory. In
aggregate, these actions increased the company's SG&A expenses by $48
million and cost of sales by $5 million in the period, negatively
impacting earnings by $33 million after tax or $0.11 per diluted share.
Taken together, the company expects to capture over $50 million in
annual savings related to these measures.

The company announced that it has entered into a binding agreement to
sell the Reed Krakoff business to a group led by Mr. Krakoff. The sale
is anticipated to close in the first quarter of FY14. Mr. Krakoff will
depart the company upon the sale of the business. The company does not
believe this transaction will have a material impact to its first
quarter FY14.

Jane Hamilton Nielsen, Executive Vice President and Chief Financial
Officer of Coach, Inc. added, "These restructuring actions will drive
efficiencies across our business by streamlining our organization and
leveraging our global capabilities and technology. In addition, these
savings will, in part, fund key initiatives related to our
transformation, notably increases in brand support. At the same time,
our strong balance sheet and substantial operating cash flow will allow
us to continue to return capital to shareholders through dividends and
share repurchases while reinvesting and growing the Coach brand
globally."

The company had previously announced that during fiscal year 2013, it
repurchased and retired over seven million shares of its common stock at
an average cost of $56.61, spending a total of $400 million. At the end
of the year approximately $1.4 billion remained under the company's
current repurchase authorization.

Fourth fiscal quarter and fiscal year sales results in each of Coach's
primary segments were as follows:

--
Total North American sales increased 6% to $825 million from $781
million last year. North American direct sales rose 5% for the quarter
with comparable store sales down 1.7%. At POS, sales in North American
department stores were slightly above prior year while shipments into
this channel also rose. For the full year, total North
American sales increased 5% to $3.48 billion from $3.32 billion last
year. North American direct sales rose 6% for the year with comparable
store sales essentially even. At POS, sales in North American
department stores were slightly below prior year while shipments into
this channel declined modestly.

--
International sales increased 7% to $386 million from $362 million
last year. On a constant currency basis, sales rose 17% for the
quarter. China results continued to be very strong, with total sales
growing 35% and comparable store sales rising at a double-digit rate.
Shipments into international wholesale accounts rose slightly, while
underlying POS sales also rose. In Japan, sales were up 4% versus
prior year on a constant-currency basis, while dollar sales declined
15%, reflecting the weaker yen. For the full year,
international sales rose 10% to $1.54 billion from $1.40 billion
generated in fiscal 2012. On a constant currency basis, sales rose 15%
for the year. China results were robust, with total sales growing 40%
to $430 million and comparable store sales rising at a double-digit
rate. Shipments into international wholesale accounts rose modestly,
while underlying POS sales also rose. In Japan, sales were essentially
even versus prior year on a constant-currency basis, while dollar
sales declined 9%, reflecting the weaker yen.

During the fourth quarter of fiscal 2013, the company opened three new
North American retail stores and closed four, while opening two factory
stores - including a dedicated Men's store. This brought the total to
351 retail stores and 193 factory stores in North America as of June 29,
2013. In China, we opened eight locations - all on the Mainland -
bringing the total to 126. In Japan, seven locations were opened -
taking the total to 191 directly-operated locations at the end of the
year. In addition, at year-end, the company operated 48 locations in
Korea, 27 in Taiwan, ten in Malaysia and seven in Singapore.
Shortly after the quarter ended, the company acquired the remaining
interest in the Coach Europe joint venture, taking control of 18
locations in the U.K., Spain, Ireland, Portugal, France and Germany.

Victor Luis, President and Chief Commercial Officer of Coach, Inc.,
added, "As we look forward to FY14, we will further enrich and build out
the Coach experience through product, retail environments and marketing.
During the holiday season, consumers will see a fuller expression of the
Coach brand, with the arrival of a limited edition capsule collection
across all product categories. Our intent is to drive brand relevance,
building upon our leadership position and laying the foundation for
future growth."

"To that end, we're particularly enthusiastic about the arrival of
Stuart Vevers, our new Executive Creative Director, who will join us in
September. Stuart's broad luxury brand experience and considerable
success, focused on leather goods, uniquely qualify him to provide
creative leadership in Coach's next chapter."

Separately, Mike Tucci, President - North American Group, and Jerry
Stritzke, President and Chief Operating Officer, have informed the
company of their decisions to leave and will depart Coach at the end of
August.

Mr. Frankfort commented, "Mike Tucci and Jerry Stritzke have both been
instrumental in the development and execution of Coach's strategies.
Their contributions building Coach into a leading international
accessories brand are considerable and we have great admiration and
respect for their significant accomplishments."

Concurrently, the company announced several key executive appointments:

--
Francine Della Badia, who is currently Executive Vice President,
responsible for all North America Retail Merchandising, Planning and
Allocation as well as Coach's Global Men's and Factory merchandising,
is succeeding Mr. Tucci as President, North America Retail.

--
David Duplantis, Executive Vice President, Digital Marketing, is
taking on the new role as President of Global Digital and Customer
Experience.

--
Javan Bunch, Senior Vice President of Licensing will assume the
expanded role of Senior Vice President and President, North America
Wholesale and Licensed Categories, reporting into Todd Kahn, General
Counsel in his expanded role as Executive Vice President, Corporate
Affairs.

--
Ian Bickley, President, Coach International, is expanding his role to
take on responsibility to include all international direct retail
businesses as President, International Group.

--
Stephanie Stahl, currently Senior Vice President, Strategy and
Consumer Insights, is taking on an expanded role as Executive Vice
President, Marketing and Strategy.

--
Mses. Della Badia and Stahl, along with Messrs. Bickley, Duplantis and
Kahn will report to Victor Luis.

Mr. Luis continued, "Our management team is among the best in global
retail, and we're very fortunate to have a deep bench of truly
exceptional talent. We're confident that this new organizational
structure - with an intensified focus on our North American business -
comprised of proven Coach leaders, will successfully drive Coach's
transformation strategy."

Coach will host a conference call to review these results at 8:30 a.m.
(EDT) today, July 30, 2013. Interested parties may listen to the webcast
by accessing www.coach.com/investors
on the Internet or dialing into 1-888-405-2080 or 1-210-795-9977 and
asking for the Coach earnings call led by Andrea Shaw Resnick, SVP of
Investor Relations. A telephone replay will be available starting at
12:00 p.m. (EDT) today, for a period of five business days. The number
to call is 1-866-352-7723 or 1-203-369-0080. A webcast replay of the
earnings conference call will also be available for five business days
on the Coach website.

Coach, with headquarters in New York, is a leading American marketer of
fine accessories and gifts for women and men, including handbags, men's
bags, women's and men's small leathergoods, footwear, outerwear,
watches, weekend and travel accessories, scarves, sunwear, fragrance,
jewelry and related accessories. Coach is sold worldwide through Coach
stores, select department stores and specialty stores, and through
Coach's website at www.coach.com.
Coach's common stock is traded on the New York Stock Exchange under the
symbol COH and Coach's Hong Kong Depositary Receipts are traded on The
Stock Exchange of Hong Kong Limited under the symbol 6388.

Neither the Hong Kong Depositary Receipts nor the Hong Kong
Depositary Shares evidenced thereby have been or will be registered
under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered or sold in the United States or to, or for
the account of, a U.S. Person (within the meaning of Regulation S under
the Securities Act), absent registration or an applicable exemption from
the registration requirements. Hedging transactions involving these
securities may not be conducted unless in compliance with the Securities
Act.

This press release contains forward-looking statements based on
management's current expectations. These statements can be identified by
the use of forward-looking terminology such as "may," "will," "should,"
"expect," "intend," "ahead," "estimate," "on track," "on course,"
"forward to," "future," "to lead," "to provide," "to delivering," "are
positioned to," "continue," "project," "guidance," "target," "forecast,"
"anticipated," or comparable terms. Future results may differ materially
from management's current expectations, based upon risks and
uncertainties such as expected economic trends, the ability to
anticipate consumer preferences, the ability to control costs, etc.
Please refer to Coach's latest Annual Report on Form 10-K and its
Quarterly Report on Form 10-Q for the quarterly period ended March 30,
2013 for a complete list of risk factors.

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